Consolidation is rampant in business travel. The last few years have seen Marriott and Starwood come together in hotels, American Express GBT and HRG in the travel management company world and many airlines join forces to explore synergies, reduce costs and — dare we say — in a bid to push prices up for corporate travel buyers.
Nowhere in the industry is immune and this week it is the turn of the expense management sector with the news that Chrome River and Certify are to merge in a deal said to be worth US$1 billion.
The combined operation will have around 11,000 clients, of which 10,000 are from Certify, including Toyota, Garmin, McDonald's and Mailchimp, and 1,000 from Chrome River, which handles expenses for more than 2 million business travellers.
Chrome River was founded in 2007 and has a focus on mid-size to global organisations for its cloud-based expense claim and invoice automation software. Certify was founded the following year and specialises in the SME and mid-market space.
K1 Investment Management will hold the majority stake in the combined business. It entered the market in 2017 when it acquired Certify along with rival companies Nexonia, ExpenseWatch and Tallie to create what it called "the largest independent company in the expense management software space".
Last year, Certify bought New York's Abacus Labs as well as Spain's Captio, its first acquisition outside North America.
"It's rare to have the opportunity to combine the two largest independent companies in such an attractive market.," says Hasan Askari, managing partner at K1 Investment Management.
The merger will position the combined entity well to capture more of the global travel and expense management software market which is expected to be worth US$2.3 billion by 2023 according to KBV research. The market, currently dominated by SAP Concur, is projected to rise at a growth rate of 10.6% during the forecast period.
Certify and Chrome River will continue to operate as independent brands for the time being. This follows the same multi-brand strategy that Certify and K1 have adopted with its previous acquisitions.
"The addition of Chrome River significantly strengthens the group's unique strategy of offering companies a portfolio of solutions that meet different client segments and needs. Unlike the traditional "one size fits all" approach, this multi-brand strategy enables companies of all sizes and verticals to work with a single vendor, yet craft the solution that is best suited to their specific business needs," the companies said in a statement.
"The companies will support all existing products and collaborate on accelerating investments in technology areas such as machine learning, artificial intelligence, analytics and reporting, to provide customers with enhanced travel, expense, and invoice management capabilities," they added.
Concur has developed an impressive stronghold in cloud-based expense management systems since it was founded by Steve Singh in 1993, which was recognised in 2014 when it was acquired by SAP in a US$8.3 billion deal.
Investors in the sector have recognised that the penetration of smartphones and the rise of self-service on the travel booking and expense claim markets have made an attractive market. The significant pain points in making expense claims mean that there is still upside for those putting money into the sector.
Automation has brought cost efficiency to the sector — an electronic report is far cheaper than a manual one. The emergence of a sizeable, global competitor to SAP Concur may now bring the cost of automated reports down too.